Bank Negara clears air over living wage

Bank Negara:

KUALA LUMPUR: Bank Negara Malaysia cleared the air on Friday over the living wage concept, stating that it is a benchmark on the income needed to attain a minimum acceptable living standard.

“It is not a benchmark to assess the extent of poverty,” it said in a statement posted on its website in response to a news report published in Sinar Harian on April 4 suggesting that the living wage should be implemented quickly.

“It is incorrect to say that Bank Negara Malaysia’s analysis on the living wage suggests that Malaysians are poor,” it said. 

The central bank said it was important to understand the concept fully so that any comments on the issue will not mislead and cause confusion.

“In addition to meeting basic needs, the living wage also provides for a meaningful participation in society, the opportunity for personal and family development, and freedom from severe financial stress.

“The living wage mainly serves as a guide for employers to consider paying employees according to the needs of a minimum acceptable living standard. 

“The living wage does not supersede the relevance of the current minimum wage of RM920 - RM1,000. The minimum wage is legally binding and aims to address the basic needs of households.

“The ability to pay a living wage should be assessed with due consideration to employees’ productivity, so that it does not translate into unwarranted increase in cost that might lead to higher inflation,” said Bank Negara.

In its 2017 Annual Report, Bank Negara pointed out that the expenditure of the bottom 40% (B40) of Malaysian households had expanded at a faster pace compared with their income.

From 2014 to 2016, the average B40 income level grew by 5.8% annually, marginally lower than the 6% growth in the B40 household spending in the same period.

Half of working Malaysians only earned less than the national median of RM1,703 in 2016.

The central bank, in consideration of the low-wage conundrum, recommended that employers use a “living wage” as a guideline to compensate their employees for their labour.

Essentially, the living wage refers to the income level needed to achieve a minimum acceptable standard of living, depending on the geographical location.

Citing Kuala Lumpur as an example, Bank Negara estimates that the living wage in the city two years ago was about RM2,700 for a single adult. The living wage estimate for a couple without a child was RM4,500, while for a couple with two children, the living wage was RM6,500.